PSC may prohibit utilities from charging fee during first 24-hours after major storm

Steve Kilar, The Baltimore Sun

The Maryland Public Service Commission may prohibit the state's utility companies from charging customers a small service fee during the first day of a major power outage.

"It's like pouring salt in their wounds. … It may be 50 cents, but in a household budget every penny counts," Commissioner W. Kevin Hughes told representatives of Maryland's energy distribution companies during a hearing Monday afternoon.

At meetings throughout the state, Hughes said, the commission has heard from utility customers who think that paying the utilities an energy-distribution fee on top of the expenses incurred during an outage — the cost of lost food, for instance — adds insult to injury.

After a quick-moving "derecho" thunderstorm in June caused an eight-day outage for some customers in the Baltimore region, the commission proposed eliminating the "bill stabilization adjustment" that Baltimore Gas and Electric Co. and the state's other major utilities bill customers for the first 24 hours of a major outage.

In 2007, the commission began allowing BGE to collect the adjustment to compensate the utility for money it might lose because of programs to reduce energy consumption. Potomac Electric Power Co., Delmarva Power & Light Co. and the Southern Maryland Electric Cooperative also have been allowed to institute bill stabilization programs.

Last year, the commission decided to investigate whether allowing the adjustment fee to be charged during outages "eliminated a critical incentive to restore service quickly," according to letters the commission sent to the utilities in February 2011.

The commission decided in January that the billing stabilization adjustment did not align the utilities' "financial incentives with reliability goals." It amended the rule to prohibit utilities from charging the fee from the second day of an outage until all customers had power restored.

The prohibition applies to any weather event that causes "more than 10 percent or 100,000, whichever is less, of the electric utility's Maryland customers" to lose power for more than a day.

Following complaints from utility customers that they were charged the fee during the first day of the outage, the commission decided to take up the issue again and decide whether the fee should be withheld during the first 24 hours of a storm as well.

If the additional prohibition were adopted, it would reflect the rules regulating the adjustment fee in Washington, where Pepco is prohibited from charging customers the fee during an outage that lasts more than a day.

Consumer advocates believe that the fee prohibition should be expanded into the first day of an outage.

"The additional experience provided by the Derecho storm now weighs in favor of the Commission applying the same standard to the 24 hours after commencement of a Major Outage Event," said Ronald Herzfeld, from the Office of the People's Counsel, in comments submitted last week to the commission.

The principle of paying for a service that is not working should be enough to prohibit the fee from being assessed during an outage, said Stanley Balis, special counsel for Montgomery County, the only jurisdiction with a representative testifying Monday on behalf of its residents.

The utilities have opposed restrictions on the adjustments, which can bring in large amounts of money. BGE estimates that it collected about $600,000 during the first 24 hours of the derecho, said BGE spokesman Rob Gould. That amounts to roughly 49 cents per customer, he said.

If the commission had not prevented the collection of the fee after the first day of a major storm outage, BGE would have been able to collect an additional $1.27 million in billing stabilization adjustment fees during days two through eight of the outage, Gould said.

"Utility distribution service is basically a fixed-cost service," Wayne Harbaugh, a pricing and regulatory services officer at BGE, told the commission Monday.

He compared it to a smart-phone data plan or a trash pickup service — the fact that the customer does not, or cannot, use the service, doesn't mean the provider's costs go down.

"I do not get a refund from my county for not having my trash picked up," said Harbaugh, reiterating a comparison made in BGE's written testimony to the commission.

The billing adjustment fee allows the utilities to consistently recoup the amount they have invested in capital projects, he said. It's a payment mechanism that compensates utilities for their investments and is unrelated to the amount of power used by consumers, Harbaugh said.

Harbaugh and a representative from Southern Maryland Electric Cooperative told the commission that removing the utilities' ability to charge a fee during the first day of a large outage was akin to penalizing them.

Customers have the right not to overpay for service, Harbaugh said, but "the utilities should also have a right to get a return on their capital they put into the business."

The commission's chairman, Douglas R.M. Nazarian, did not indicate when the commission would decide about whether to restrict the fee's use during the first day of a large outage.